UPDATE 1-HSBC appoints CICC, Citic Sec for Shanghai IPO

* HSBC confirms has appointed underwriters, declines details

* UBS and Goldman lose bids for mandate, sources say

* Timing of planned Shanghai IPO depends on China regulators (Adds confirmation from sources, background, changes dateline)

By Wei Gu

HONG KONG, Aug 4 (Reuters) - HSBC Holdings Plc, Europe's biggest bank, has hired China International Capital Corp (CICC) and Citic Securities Co (600030.SS) to help arrange an initial public offering in Shanghai, a person with direct knowledge of the situation said on Tuesday.

HSBC (0005.HK)(HSBA.L) confirmed that the bank had appointed underwriters for its planned China IPO, but declined to give details. UBS AG (UBSN.VX) and Goldman Sachs (GS.N) lost their bids for the mandate, sources said.

China in May agreed to let qualified foreign companies list on its stock exchanges through issuing shares or depository receipts, part of efforts to deregulate its capital market.

"For a global bank such as HSBC, selling shares locally would boost its brand awareness and help it diversify risks," said Fan Kunxiang, analyst at Haitong Securities Co. "I don't think raising some money would be the main purpose for HSBC."

The timing of the planned Shanghai IPO would depend on China's regulators, HSBC Asia Pacific Chairman Vincent Cheng told Reuters on Tuesday. The lender plans to raise $3 billion to $5 billion in an IPO next year, Dow Jones reported.

HSBC, already the biggest foreign bank in China by network, is in talks to set up an investment banking venture in the country, Cheng said.

HSBC is a strategic shareholder in Bank of Communications (3328.HK)(601328.SS), China's fifth-biggest lender, holds a stake in Bank of Shanghai and owns a fund-management venture. In June, it received regulatory approval to launch an insurance joint venture in China.

CHINA IPO

HSBC and rival Bank of East Asia (0023.HK) have said for many years that they hope to sell shares publicly in China once rules allow, as they vie to become the first foreign company to be listed in the country.

HSBC's appointment of underwriters came after China pledged in May to allow foreign companies to list domestically, as the country aims to make Shanghai a global financial centre by 2020. There has been no official timetable for IPOs by foreign firms.

A China listing would offer obvious benefits to multinational companies such as HSBC, McDonald's (MCD.N) and Starbucks (SBUX.O), according to Bank of New York Mellon Corp (BK.N), which advises China on the rollout of China Depositary Receipts (CDRs).

Apart from access to capital and the ability to broaden their shareholder base globally, a local listing would help foreign firms with China operations promote their brand awareness in the domestic market and allow them to compensate local employees with stock options, the bank said in an interview in May.

HSBC, which earned about 90 percent of its first-half profit in Asia, sees China as a key driver of growth. It competes with rivals such as Citigroup (C.N) and Standard Chartered (STAN.L) to woo increasingly wealthier consumers in China.

CICC, part owned by Morgan Stanley (MS.N) is China's biggest investment bank managed by Levin Zhu, the son of former Chinese Premier Zhu Rongji. Citic Securities is China's biggest listed brokerage. (US$1=6.832 Yuan) (Additional reporting by Samuel Shen in Shanghai, Editing by Jacqueline Wong)